Term Life Insurance vs. Whole Life Insurance: Information for Parents

Answers to you basic life insurance questions.

If something happens to you or your spouse, life insurance can prevent a financial burden from adding to that loss. There are two basic types of life insurance your agent will most likely discuss with you, term and whole. Each has its pros and cons, but both are designed to fit within most any family budget.

Term Life Insurance

Term life insurance is the simplest form of life insurance. With this, you pay monthly or yearly premiums for a term. The term is the set numbCredit: Flickr: Childrens Book Reviewer of years in which your premium remains locked and does not increase and your coverage remains consistent. For example, you can typically choose a 10, 20, or 30-year policy where your premium and policy will remain the same for that set amount of time. After the initial policy time has expired, you can renew your policy. However upon renewal, your rate will likely increase. When choosing how long to of a term to buy, consider the age of your kids. Ideally you at least want to have term available for as long as your kids are financial dependant on you. So if you have young children, then a 20 or 30 year policy is idea. If your kids are older, then you may only need a 10 year policy.

Whole Life Insurance

Whole life insurance is considered a permanent life insurance policy. Unless you cancel the policy, you have continued coverage for your entire life rather than a set number of years. As long as you continue to pay on time, your premiums have a locked rate for life. The biggest difference between whole versus term, is that whole life insurance becomes an investment that you can tap into when alive. The policy has a cash value that you can borrow against while keeping your policy in good standing.

Term Life Insurance vs. Whole Life Insurance: Which is Best for Your Family?

There are benefits to both types of life insurance, and some families choose to get both. Term is cheaper, often costing less than $100 a month if you are healthy and not a smoker, but only pays upon the death of the person covered. Term is also a temporary insurance in which the rate and coverage will expire. Whole life insurance is significantly more costly than term life insurance, but it acts as an investment that you can use for college, medical, or other large future expenses. Although the cash value will be significantly less than the death benefits and taking a loan or part of the cash value reduces the death benefit amount.

Consider your budget and possible future expenses to help you decide if you should take out a term or whole life insurance policy or both. Term insurance is more affordable and will give your family security at least until the kids are adults. Whole life insurance will cost more, but give your family security for life. Some parents choose to purchase whole life insurance for the lifetime coverage and cash value and term life insurance for extra less expensive coverage until the kids are grown.